Online Video Expected to Overtake DVD, Blu-ray Viewing this Year

Americans will watch more movies from legal, online sources in 2012 than they will on DVD or Blu-ray, according to a new study by IHS. Online movie consumption will rise to 3.4 billion views or transactions this year, IHS projects, compared with 2.4 billion views for physical media.

For U.S. viewers to reach that 3.4 billion figure, IHS is banking on an explosion in online video consumption. As Telecompetitor reports, Americans watched only 1.4 billion movies from online sources last year, so online consumption would have to increase by more than 135 percent to reach that goal.

But that kind of growth seems possible considering how busy the online video business has become. Of course, IHS sees Netflix as a huge driver for online video consumption, with users “snacking and sampling” on the service's deep catalog.

Netflix also has a glut of new competitors, such as Amazon and traditional pay TV providers that are also trying to get into the streaming video business. Comcast has announced its own service called Streampix, and Verizon has teamed up with Redbox on an upcoming Netflix rival. Dish Network already offers a streaming video service for its subscribers under the Blockbuster brand. HBO Go has also been expanding beyond the PC to iOS devices, Roku and, most recently, the Xbox 360.

The rise of online video over superior-quality Blu-ray discs is another example of convenience trumping quality. We've already seen this play out in the music business, where lousy audio formats such as MP3 have led to the decline of compact discs. (Digital music sales finally overtook CDs in 2011.)

Even if online movie viewing overtakes optical media this year, fans of optical media should still have plenty of time before their format of choice becomes obsolete. As of last fall, Blu-ray sales were still growing, and although DVD sales are plummeting, they still account for billions in revenue for Hollywood. Movie studios are in no rush to stop selling discs, even as a future dominated by online viewing looms.